Friday, July 27, 2007

Latvian banker complains about the real estate bubble

In an interview to Baltic Business Service, Latvian banker Ainars Ozols (the chairman of the board of SEB Latvijas Unibanka) complains about some effects of the real estate boom in Latvia:
The real estate industry has spoiled the [business] people because they no longer have to think how to earn money. They can just buy a house and land and then resell for me. That's all the business. No need for innovative ideas, no need for effort. This is not normal for long-term development.
Ozols also said that he would like to be optimistic and that, in past, Latvian businesses have been able to adjust rapidly when needed (for example, after the 1998 Russian financial crisis which had substantial effect on Latvia).

Meanwhile, a real estate analyst from the "Arco" company predicts 8-12% drop in the prices of Soviet-era apartments in Riga but no drop in the prices of newly constructed ones. The full report from Arco is here. It's only in Latvian but it has a lot of interesting information. For example, I didn't realize that the number of newly built apartment is still only half of what it was in 1990, at the end of Soviet period! The "current construction boom" is less of a boom that people think....

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